Demand for warehouses continues to surge despite pressure on consumers

Experts from real estate advisory firm Colliers said a boom in the third-party logistics sector has kept demand strong.

31 July 2022

Prices and demand for warehouses and logistics sites have rocketed over the first half of the year despite pressure on consumer spending, according to research.

Experts from real estate advisory firm Colliers said a boom in the third-party logistics sector has kept demand strong as retailers have outsourced the processing and delivery of online orders.

Andrea Ferranti, head of industrial and logistics research at Colliers, told the PA news agency that there have been “some early signals” of the cost-of-living crisis impacting activity from buyers.

However, he stressed that the “chronic shortage” of warehouse supply means there are still significantly more interested buyers than available warehouses or land opportunities.

“I don’t see the balance between the demand and supply easing although there have perhaps been some early signals of pressures in the economy,” he told PA.

“Certain companies have been more firm on their offers, harder in negotiations, but for those selling, there are still so many interested parties that the pricing is still much higher than we had seen before.

“I also cannot see anything which will ease the supply hurdles in developing sites, so we will see capacity much lower than demand even if the economic backdrop causes more distress.

“Despite what you might expect, the lack of supply means prices just keep rising.”

Demand for large sites remained particularly strong as Colliers revealed that 26 deals took place involving warehouses over 300,000 sq ft, jumping from 23 deals in the same six months last year.

It comes after the pandemic proved to be a catalyst to rapidly accelerate the switch by many shoppers further towards online from shopping in physical stores.

Nevertheless, some firms such as AO World and Ocado have indicated that online sales growth has slowed more significantly than expected so far this year as shoppers have returned to shops or tightened their belts with their spending more broadly.

Len Rosso, head of industrial and logistics at Colliers, said “online retailers have decreased their activity” in the market over the past six months.

He said around half of all transactions last year were from retailers but represented only 13.6% so far this month.

“This can be partly explained by the increase in activity by third-party logistics, which many online retailers are currently employing for logistics solutions,” Mr Rosso said.

“It is also worth noting that the year-on-year figures are largely skewed by Amazon, which alone accounted for 35% of the total in the first half last year, they are a clear testament to a robust occupier base in the market.”

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